The Pound Euro and Pound US Dollar exchange rates are advancing as markets seek shelter from volatility after President Trump’s inauguration.

Latest News:

Pound US Dollar rises as investors desert USD

Euro strong, although threat of Trump weighs

US Dollar slumps as Trump speech focusses on protectionism

ECB Draghi and Praet speeches incoming

The Euro has also been boosted by US Dollar weakness, although the common currency has weakened against the Pound as investors believe Trump poses a more immediate threat to the Eurozone than the UK.

Morning Update, 24th Jan; The UK Supreme Court has ruled that the UK government does not have a constitutional right to activate Article 50 of the Lisbon Treaty without the prior approval of Parliament. However, it has also ruled that the devolved governments of Scotland, Wales and Northern Ireland do not have a right to influence the decision. This has increased the likelihood that Scotland will hold another independence referendum, so Pound Euro and Pound US Dollar exchange rates have weakened.

Pound exchange rates have seen a strong rally today following Friday’s US Presidential inauguration, with investors once-again buying Sterling as something of a safe bet. It may seem counterintuitive, considering Brexit is on the way, but traders expect GBP volatility to be much less severe than that of safe currencies like the Euro and US Dollar.

Similar to what was seen after Trump’s election, the belief that GBP may already have received its biggest shock – while the worst could be yet to come for the EUR and USD – has boosted the Pound Euro exchange rate to a two-week high and sending Pound US Dollar exchange rates up to a five-week high.

Also supporting the Pound is the fact that markets are confident tomorrow’s Supreme Court ruling will uphold the previous challenge against the government. Inside sources claim that even the Cabinet expects the Supreme Court to uphold the High Court ruling stating that Parliament must vote to trigger Article 50. This would give MPs a chance to moderate the government’s ‘Hard Brexit’ stance, potentially lessening the impact of leaving the European Union and improving the outlook for Pound Sterling.

Weak demand for the US Dollar has pushed the Euro higher today, although the overall outlook for the common currency does not necessarily warrant such strength, allowing GBP EUR to remain bullish even as EUR USD advance.

While the Euro is a more appealing option than the US Dollar at this juncture, President Trump could easily become a dragging factor on the Euro as he has the ‘Greenback’. The President’s inauguration speech focused heavily on his protectionist intentions, threatening EU-US trade links. Trump has also recently commented that USD is overvalued; a concern for the European Central Bank (ECB) as policymakers are relying on a strong ‘Buck’ to keep the Euro weak, assisting the Eurozone economic recovery.

‘There is a very strong international consensus in the G20 and the G7 to refrain from competitive devaluations. So there is a whole protocol in the various statements by the G20 and the G7 that basically states how countries should behave with respect to exchange rates.’

‘To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.’

The page only provides the same explanation of Trump’s strategy for growth – tax cuts and a focus on bringing jobs back to America – that the President gave on the campaign trail, leaving investors with no new information. Additionally, the protectionist rhetoric is clear – unsettling investors who worry that Trump’s dislike of free trade could damage the US economy. The White House website further explains;

‘By renegotiating existing trade deals, and taking a tough stance on future ones, we will ensure that trade agreements bring good-paying jobs to our shores and support American manufacturing, the backbone of our economy. The President plans to show America’s trading partners that we mean business by ensuring consequences for countries that engage in illegal or unfair trade practices that hurt American workers.’

It has already been announced that Trump will today sign an executive order signalling the start of renegotiations for the North America Free Trade Agreement (NAFTA). He is also expected to soon sign an order to being the withdrawal process from the Trans-Pacific Partnership.

In addition to a spat between the White House Press Secretary and the press regarding the size of Trump’s inauguration crowd (the press claim photos of the event show attendance of around 250,000, while the President and his aides claim the audience was around 1.5 million strong) has further dampened hopes that President Trump will be more restrained now that he has taken office.

As a result the US Dollar is down -0.3% against the Euro, while Pound US Dollar exchange rates have been able to climb 0.6%.

UK and US data is virtually non-existent today, leaving the Pound likely to respond to developments within the Eurozone. The ECB’s Mario Draghi and Chief Economist Peter Praet are giving separate speeches later today.

The Governing Council members may use their speeches to address some of the concerns raised after President Trump’s inauguration speech, potentially reinforcing the importance of trade to the Eurozone economy and warning against trying to influence exchange rates with rhetoric.

Traders may interpret these as signs that the ECB is worried by the impact Trump could have on the Eurozone and this could sour Euro sentiment, allowing Pound Euro exchange rates to make further gains. Pound US Dollar exchange rates are likely to continue on their current trajectory.

Interbank Pound Euro, Pound US Dollar Exchange Rates

At the time of writing, the Pound Euro exchange rate was trending around 1.16, while the Euro Pound exchange rate was trading in the region of 0.86.

The Pound US Dollar exchange rate was trading around 1.24, while the US Dollar Pound exchange rate was trending in the region of 0.80.